Friday, June 17, 2016

A short introduction to the economics of Namibia, for those of you long B2Gold.

Alternately, a good intro to how a country that experienced 19th-century European colonization, then fought through a long resistance war against South Africa, has nevertheless managed to turn itself into a shining lesson on how an African country can actually progress into the 21th century, with press freedom, universal education, health care, and all the other things that other African countries are utterly incompetent at.

This pattern of increased sales and decreasing inventories is what happens just after a recovery from a recession starts. It adds to the evidence that March was the bottom of the shallow industrial recession.

Tuesday, June 14, 2016

Well, I got 100% on my second intro math of finance test, so I only need 83% on the final for an A+. Now all I need to do is actually study this stuff for the exam.

By the way, last night we learned why the gold forward contract price must be nothing other than today's gold price times the cost of money: if it's not, the difference can be arbed away by big money for guaranteed profit at zero risk.

Again, a really neat bit of economics that I didn't learn in economics class.

As for market comment?

Well, as of this moment, intraday $VIX has exploded 50% higher to 22, yet SPY is only down a couple percent. ($VIX futures are still in a flattish term structure but following the intraday move higher, with the front month expiring today).

That suggests to me that what the market is doing is merely buying downside protection without a passionate desire to actually dump their positions. That looks like underlying confidence. Though of course that could fly out the window as it did last August. Though everyone's probably thinking of last August anyway.

Someone with more market knowledge can move in to correct me here.

So right now I'm still 80% single-long S&P 500, not sold anything, but looking to possibility to short $VIX with HVI.to in the future depending on what happens with the looming Brexit binary outcome that's driving all this silliness.

1. If the pound falls then the Euro rises, and that shouldn't negatively affect US exports. US buys nothing from the UK anyway, so US imports aren't negatively affected either.

2. the EZ and UK would either try to counteract the damage to their economies through expansionary policy, which would benefit US exports to the EZ and UK; or they will double down on idiotic austerity, which destroys their economies further and reduces US firms' foreign competition. Net no big deal.

3. Nevertheless, the market would piddle its panties as the whole investment world would have to re-allocate to the new reality.

4. Then the market would start to piddle yet more on concern for future exit votes for any other country hurt by EU austerity policy, plus a German exit because Germans just love pulling infantile fucking snits don't they.

Monday, June 13, 2016

Still unable to post images because of Google's "we demand complete control of your computer" policy here at blogger.

So I'll just point out that $VIX has skyrocketed to over 20. This despite SPY hardly being down at all.

If you think it's justified panty-piddling over Brexit, then I dunno how much do you want to be in the market over the next two years, which is how long it'll take for the UK to actually negotiate terms for its exit, which won't be an exit after all because no matter what the proles want, the City is going to want to remain the EU's financial centre, and that'll mean the UK becomes "EU but not EU", just like Quebec's intentions during our own last separatist referendum.

Then again, the wobbly term structure might indicate that people are also buying downside protection against a Trump presidential win.

Who knows? Maybe the lack of equity selling is going to result in another catastrophic selling spree like last August, where ultimately something broke and QQQ was trading at a 10% discount to its underlying.

Haven't been posting much lately. Been too busy learning about spot rates and forward rates and zero coupon bonds and STRIPS and so on - in a math class, not an economics class. Also doing outdoor work.

When all but one of the few negatives are among coincident indicators and both long and short leading indicators are uniformly positive to neutral, we should expect improvement in the months ahead. The week ahead will be a very busy one for data. I will be especially watching for new orders from the Empire State and Philly Fed indexes, and to see if industrial production at very least holds its March low, if not continues higher.